The Case Against Rahm

April 3, 2015

I wish I could be with Rahm and feel Chicago is in the hands of a tough, capable leader. But I’ve come to understand that our great city is about to re-elect a guy just as bad or worse than Rod Blagojevich. I wish I were exaggerating.

If this mayor isn’t corrupt, he does nearly everything possible to look like it. And, where isn’t corrupt, he’s just incompetent.

Like you, I had heard buzz words that went in and out of my head – red light cameras; Magic Johnson; Janitors; Bond downgrade. Election day is Tuesday, and I needed to figure out who to vote for. So, I started reading. And, I’m horrified by what I’ve learned. When you lay it all out, it’s a stunning portrait of a skilled crook, who is either going to bankrupt our city while he blusters and bullshits or he’s going to tempt the doors of prison.

Rahm is Corrupt

Can we start with a basic rule? People who make decisions on how to spend government dollars shouldn’t be a recipient of any of those dollars. That’s a conflict of interest, and it’s illegal. So, here’s the problem: some of Rahm’s decision-makers are recipients of the public cash they are spending for the city. Not pennies – millions of dollars of government money are funneled by Rahm or his soldiers into the pockets of Rahm and his soldiers. It’s just that simple. No one is hiding it. They are stealing my tax dollars and yours in broad daylight. But, look, I don’t want to write a 30 page opus any more than you want to read it. So, let me tell you a few short stories, ripped from the headlines.

Magic Johnson and the School Janitors

In 2013, The Chicago Public Schools (CPS) hired Magic Johnson’s company, SodexoMAGIC, to clean 33 schools; they also hired Aramark, a huge company, to clean the rest of the schools. The price: $80 million to Magic Johnson, $260 million to Aramark.

In September, not long after Magic and Aramark took over cleaning the schools, principals and teachers started complaining that the schools were filthy, infested with vermin and covered in grime or worse. Rahm promised to fix the problem. Five months later, the schools remained filthy – Magic Johnson did three things:

He announced he would give back $10 million to a Chicago summer jobs program.

He gave $100,000 to Rahm’s campaign funds.

One month later, he gave another $150,000 to Rahm’s campaign funds.

When a reporter asked Rahm if taking campaign contributions from a city vendor was unethical, the Mayor said, “The good news is he’s given $10 million to our children and provided 5,000 of our kids an after-school program.”

So Magic Johnson got an $80 million paycheck from our city, donated $250,000 to the boss and did a shoddy job for our school children. Ironically, he did manage to launder the exchange with a $10 million donation to the city that can probably be used to reduce taxes on the $80 million of income from the city.

Money From Pension Managers

Of course, the city pays millions of dollars every year to a variety of professional investment firms to invest city pensions – that’s okay. The problem is that many of those firms are run by people who have donated more than $600,000 to Rahm’s campaign accounts.

For example:

Managers at Madison Dearborn have given more than $500,000 to Rahm’s campaign funds. Madison Dearborn is concealed as a city vendor. You have to peel back the layers on the funds it manages, and when you do, it turns out that nine Madison Dearborn funds hold a substantial chunk of one $5.3 billion pension.

Another investment firm, John Buck Co., manages roughly $54 million in Chicago pension funds and earns hundreds of thousands in fees every year. Managers at John Buck Co. have given $57,500 to Rahm’s campaign funds.

Rahm’s own adopted rules against city officials taking campaign contributions from city contractors.

Look, there is a reality to politics – you have to raise money. But, Rahm raised more than $30 million. If he didn’t want to be or look corrupt, he should have followed his own rule and not taken money from people who have benefited financially from his ability to control the city. He should have had more respect for the voters and the city to avoid both the suspicion and the drama of parsing out which funky payments were the product of graft and which were the product of friendship. But, all the money doesn’t just flow into Rahm’s campaign funds – some goes to his friends.

$20 Million Mentors for School Principals

Here’s a doozy. CPS is $1.1 billion in the hole for next year, and measures are being put in place to enable CPS to file for bankruptcy. But, CPS just hired a company to coach school principals – for $20 million. The company is Supes Academy. Before Rahm named her to be the CEO of Chicago Public Schools, Barbara Byrd-Bennett worked for Supes Academy. No one else – for-profit, not-for-profit or academic – was asked to bid on this contract. If Supes was an outstanding, obvious choice, fine, but Supes has a relatively weak track record and no relevant differentiators that make them qualified for a no-bid contract.

School Board Member’s Companies Triple Business with CPS

Deborah Quazzo is a venture capitalist who invests in for-profit education companies. Rahm appointed her to the Chicago School Board in June, 2013. And, man, oh man, is she mad. The Sun Times figured out that companies she partly owns have tripled their business with CPS since Quazzo joined the board. She is outraged that someone would dare to besmirch her reputation, since she’s done everything to the letter. Okay. Let’s put aside some key omissions from her disclosure report (like a couple of companies). Let’s put aside the fact that, after she joined the board, one of Quazzo’s companies started discounting bills to just below $25,000 (sparing required CPS approval for bills over $25,000.) Let’s just look at the coincidental facts:

Before She Joined the School Board

After She Joined the School Board

Amounts paid to Quazzo’s companies…

$930,000

$2,900,000

She has recused herself from voting; she has promised to donate profits made form contracts. But, she still owns them, she still maintains a powerful presence on the board. And those companies that provide for-profit services to our nearly insolvent not-for-profit schools have exploded under her watch.

The Red Light Cameras and Rahm’s Number One Aide

For years, lobbyist John Borovicka was one of Rahm’s top aids. In 2013, the city needed to hire a new red light camera provider. The city awarded the $44 million city contract to Xerox State & Local Solutions, Inc., just 18 days after it hired John Borovicka to lobby the mayor’s office. (Truthfully, I’m the only one I know who likes the red camera program. But, in reality they don’t work very well. They ticket people running through yellow lights or a few miles over the speed limit, and there is no proof that they improve safety.)

So those are the 4 stories I promised you. There are more, but after awhile it just gets repetitive. If Rahm is not corrupt, he’s got a funny way of showing it. If he’s not corrupt, he would hold himself, his decision-makers, as well as his donor-vendors accountable. But, that’s not always the case.

Remember, CPS outsourced its janitorial services to Magic Johnson’s company and Aramark. From the beginning, school workers complained about filthy buildings. On September 17, 2014, Rahm was asked about what he was going to do to fix the problem he created. He said:

“Aramark’s job is to clean the schools so our principals and our teachers can focus on their fundamental responsibility: education. They will either live up to that contract and clean up the schools, or they can clean out their desks and get out.”

Six months later, on March 19, 2015, new reports revealed that 90% of principals said their schools were still just as filthy, but now the principals had to pitch in for cleaning supplies and cleaning tasks. In response, Rahm said:

“I’ve told the company, they’d better fix this. And I’ve been in communication directly with the board that everybody has to be held accountable and, if it’s not, it’s gonna be a very short contract.”

When he was reminded of his September statement with the same language and lack of results, he ignored the question and walked away. Six months later, no accountability, just some collected campaign checks and payoffs to keep us all quiet.

Is he corrupt or incompetent?

Let’s give Rahm the benefit of the doubt and say the smoke comes from no fire. He could just be incompetent, one of the all time overrated fuck-ups, failing ever upwards on a most public stage.

Our Credit Rating Has Been Lowered to The Junkyard

Under his watch, Moody’s has downgraded our credit rating twice. In the last downgrade, Moody’s blamed it on Rahm’s decision to finance the city’s operations with intensely expensive debt. Chicago was also downgraded by Fitch’s to just above junk bond status. Fitch’s said in writing that Rahm’s fight with the teachers unions led Fitch’s to conclude that we won’t be able to plug the holes in the pension deficits.

Wasted TIF Money

Rahm doesn’t use the TIF money to fix what’s broken – he uses TIF money to coax rich companies to go a little faster. TIFs are a way for the mayor to skim money off the top of property taxes and dump it into a pot to which only he has the ladle. Not the aldermen, not the legislature, just him. That’s why TIF funds are called the “shadow budget.” TIFs are very controversial and confusing and borne to confuse, but here is what we do know:

TIF money is meant to be“used to build and repair roads and infrastructure, clean polluted land and put vacant properties back to productive use.” But, that’s not how Rahm is using our TIF dollars. Here’s a sample:

$7 million subsidy for a new Mariano’s grocery store in the Loop (he also got a $40,000 campaign donation from a member of Mariano’s board of directors).

$55 million for construction of a Marriott hotel near McCormick Place.

Now, look, I’m not arguing that these aren’t worthy projects. I love drinking while grocery shopping, and, if I ever join the East Bank Club (with Rahm), I’ll have a place to work that’s close by. But, TIF dollars are only supposed to be used when other funds aren’t available.

Rahm isn’t even upfront about where this money is going. An enormous amount of TIF funds are listed on city records as “restricted for future redevelopment.” And, last year, we discovered that there is $1.7 billion sitting in the TIF accounts … just sitting there. Rahm has rejected Freedom of Information Act (FOIA) requests for information, and he won’t even tell alderman where the TIF money is going, what he plans to do with it or why it’s just sitting there.

Swaps: He Locked Us in And Made It Worse

And, then, there are those awful swaps. (I’m going to try to make this clear, but you can skip to the next paragraph.) The swaps weren’t started by Rahm – they were started by Daley and his Chief Administrative Officer for CPS, David Vitale. These swaps were newfangled loans the city took out from public investors at too-good-to-be-true low interest rates that had the capacity to skyrocket with interest rates or market turmoil. These loans were sold with swaps, a sort of financial perpetual motion machine of back and forth payments between the city and the bank based on a key interest rate called LIBOR. The city was essentially making a bet that LIBOR would stay the same as the interest rates under the loans. That way, the swap back and forth payments would fund any interest rate increases on the loans. (Forget it, don’t try and understand.) But, then, reality had to set in – the market crashed, auction rate securities turned out to be a scam and LIBOR was manipulated by the kinds of banks that sold the city the loans/swaps in the first place. Those mismatched payments, and the big-swinging-dick complexity of these financial instruments cost the city and the schools $400 million. On top of that, Moody’s and Fitch’s lowering of our credit rating triggered default penalties of $228 million. Which is to say, none of this is Rahm’s fault – except for the part where we can’t get out of it and where he might have made it worse.

The swaps and the loans that went with them were so wretched that other victims and governments are suing the investment banks that sold them. Chicago has grounds to sue and get out of these deals. But, Rahm made the guy who brought these swaps and loans to the city – David Vitale – President of the Chicago Public School Board. Vitale spends his days dealing with the fallout from the shoddy swaps & loans he engineered and insisting he understood the risks. See, it’s almost impossible for us as a city to argue that we were fraudulently induced to enter these deals when the engineer is now the conductor. Rahm also may have made the whole situation worse. True, Rahm terminated some of the swaps, but he also took out entirely new swaps using more unpredictable interest rates, essentially gambling on interest rates. So, we’re stuck with $400 million in payments and counting.

So, that’s what’s happened with the money. Let’s look at the cops.

He Has Mismanaged the Police Force

Shortly after taking office as mayor, Emanuel ordered the police to reduce spending by $190 million, reducing the number of police officers. He also gutted the number of detectives solving cases by 25% and reassigned detectives to new, unfamiliar neighborhoods.

You know what happened. Shootings went through the roof. So, he addressed the consequences of cost cutting and sloppy management by ordering cops to work overtime at night. As a result, the city blew through its overtime budget in a single season.

Worse, clearance – the number of solved or closed cases – is at its lowest point in decades. Our police departments are too short-staffed to actually solve murder cases. Compare: in 1991, we cleared nearly 70% of all homicides; in 2014, we cleared less than 30%.

So, he’s gutted the rank and file and moved them into new, unfamiliar neighborhoods, decimating years of relationships and community policing efforts. He’s also adopted the worst Cheney-esque tactics that are both embarrassing and unproductive.

Rahm’s police force operates a special battalion of interrogators with its own black ops rendition site – like he’s the fucking CIA director – except instead of foreign terrorists, he’s snatching and torturing American black and brown people. If the cops take you to to the West side warehouse bunker known as Homan Square, you won’t get a lawyer, and your stay won’t be recorded. You’re lost in the ether from which American citizens are supposed to be free. One man died in custody at the facility, but there is no record or reason for his detention – not even a coroner’s report.

Rahm’s police force is good at one thing: racial profiling and stop and frisk. 72% of all stops in 2014 were against black Chicagoans (they make up only 32% of the total population). Chicago has shattered even New York City’s 2011 stop and frisk record with 93.6 stops per 1000 people between May and August 2014. By contrast, NYC’s 2011 rate was 22.9 stops per 1000.

There’s More. Way More. But I’m out of time.

What Should We Do?

Okay. Chuy. That’s the thing that’s got you sticking with corrupt, incompetent, petrified, insecure, possibly deranged, “you’re gonna respect me” Rahm. I know, I feel you. I wish Chuy were more commanding. I wish he issued three clear sentences about how he’s going to fix the budget. I know.

But here’s what I also know:

Chuy has been an alderman, a state senator and a county commissioner.

Toni Preckwinkle, The-Mayor-Who-Got-Away, installed him as her floor leader.

Together, Chuy and Preckwinkle reformed the unreformable Cook County, lowered the sales tax and balanced the budget.

Chuy will have the best possible circumstances: cooperation by the unions and the straightjacketed discipline of the city’s financial conditions.

He seems so damned decent.

When I started looking at the candidates, I leaned toward Rahm. But, what I’ve learned stuck with me, nagged at me, until I had a revelation. It’s 2006. it’s the Democratic primary for governor. Rod Blagojevich, tall, tough, slick, is running against a decent unknown named Ed Eisendrath. Anyone paying attention knew how corrupt, silly, pontificating, bullying and petty the governor was – we voted for him anyway. A few months later, we woke up to helicopters hovering over his house to film his arrest. Except, this time, the man in the house is too connected, too knowledgeable about anyone who appoints a prosecutor. He will evade. He and his well-paid surrogates will push and parse every line to show you he didn’t break the law. They may be right, he may have stayed just inside the lines. But, the first rule of governance is this: People who make decisions on how to spend government dollars shouldn’t be a recipient of any of those dollars. He and his people are making decisions at the spending end and collecting at the receiving end. And, even if he is never convicted of corruption, he has made decisions that hurt our city and our people tremendously.

We cannot continue to turn over the city we love to a man we know is corrupt in the hope that his arrogance will conquer our demons: debt, poverty, crime and creditors. We’ve taken the devil we know for 24 years. Our city – though shining and vibrant at the core – is crumbling and tilting at the seams. Please, please, this one time, don’t pick the one with the loudest, toughest voice. Pick the guy who has devoted his whole life to making your life better.